Corporate Banking

Economic conditions in Iceland were in generally very good in 2017. The growth phase is in its seventh consecutive year and economic growth was robust during the year. As a rule, corporate balance sheets were strong and this created scope for increased activity. Landsbankinn contributed to this environment, working effectively in accordance with its strategy to be a trusted financial partner who provides customers with excellent financial service.

Robust and reliable corporate banking services

Landsbankinn has throughout its operating history supported a plethora of industries in Iceland. As a result, the Bank enjoys a strong standing in the corporate market. The Bank's market share in corporates has increased in recent years and was 34.8% at year-end 2017, as compared with 33.4% at year-end 2016, according to Gallup's market surveys.

Lending growth to corporates was conservative for Landsbankinn in 2017. Landsbankinn's share in loans to corporates remains the largest of the three commercial banks, or 40%. The Bank's loan portfolio to the construction industry has increased most, with lending to trade and services also gaining. Fisheries and seafood companies are generally in a good place with leveraging decreasing.

Strong partner of industry

Landsbankinn aims to provide companies of all sizes and in all sectors throughout Iceland with first-class service. An ever-growing part of these services is provided via electronic distribution channels and in 2017, various new features were introduced in corporate online banking.

Market share in corporate lending*

40%

*Based on the banks' annual financial statements for 2017.

Share in the corporate banking market

Source: Gallup

Satisfied customers

91.3%Source: Gallup's service survey

Small and medium-sized enterprises in the capital region have access to all services through the Corporate Banking Service Centre in Borgartún 33. Customers have been very satisfied with the services and advice provided through the Centre, with a survey carried out be Gallup showing that 91.3% of its customers are very or rather satisfied.

Landsbankinn also places a great deal of importance on providing services to companies in rural areas and Gallup's surveys show that Landsbankinn holds the largest market share of the three major banks in these areas.

Increased service to small and medium-sized enterprises

Landsbankinn is constantly on the lookout for means to provide customers with better service, show initiative and offer corporate customers appropriate specialist advice and service. Since 2015, the Bank has offered retail customers a comprehensive financial advisory service referred to as 360° advice. In fall 2017, the Bank began offering 360° conversations to select small and medium-sized enterprises. Company owners are invited to attend a conversation that incorporates a comprehensive review of all financial aspects of operations, such as financing, returns, electronic solutions and strategic planning for the future. These conversations have been well received and it is clear that they boost corporate services and increases satisfaction with the banking relationship.

Strong in construction financing

Landsbankinn has over the course of many years been a leader in construction financing. The Bank has in the past provided the most funding for new residential apartments and hotels. There is great demand for residential housing and the Bank considers support for contractors engaged in residential construction to be part of its corporate social responsibility.

Larger projects in this field, financed by the Bank, were 93 at the end of the year, managed by 60 construction firms. There were four hotel construction projects and as many commercial housing projects. Construction projects involving new apartment housing were by far the most numerous, with a total of 85 such undertakings, financed by Landsbankinn, in full swing at the end of the year.

Strong partner in tourism

These projects involve the construction of 2,880 apartments which will enter the real estate market in 2018 and 2019. The lion's share of these apartments is located in the capital area, with some larger projects also in Selfoss, Akranes and Reykjanesbær.

Landsbankinn has focused on financing for the travel industry in recent years, including the funding of new hotels. This is not least important in light of the fact that tourism is now the industry that accounts for the most FX earnings in Iceland. Three of the hotels financed by the Bank are located in the capital region; one outside the capital area. The continued increase in tourist arrivals in Iceland has led to a shortage of accommodation, especially in the summer months. The Bank has been enthusiastic about participating in groundwork projects in the field and now holds a leading position. The same applies to other facets of the travel industry, such as group tour companies and car rentals, and there has been healthy growth in the Bank's lending to entertainment companies. ITF I, a dedicated Travel Industry Fund managed by Landsbréf, has invested in many exciting ventures in this field.

Landsbankinn fully intends to maintain its leading position in construction financing, both as regards construction of new residential housing and continued development of infrastructure for the travel industry. The Bank looks forward to meeting new and exciting challenges in these fields over the next couple of years.

Large construction projects financed by Landsbankinn

93projects

Number of apartments financed by Landsbankinn*

2,880apartments

*to be completed in 2018 and 2019

Strong supporter of companies in both town and country

Fisheries and agriculture have traditionally carried the Icelandic economy. In recent years, significant innovation, development and progress have driven edification and renewal of these industries. Landsbankinn has been an active participant in this process, providing financial support for large projects in rural Iceland. Most fisheries enterprises are well positioned, with leverage decreasing alongside considerable renewal and development.

Increased emphasis on trade and services enterprises

Landsbankinn's engagement with customers in trade and services increased considerably in 2017. Several new companies in this segment, large and small, brought their business to the Bank. It is a testament to the Bank's good reputation both domestically and abroad that large, international companies who have entered the Icelandic market have chosen Landsbankinn as their principal bank of business in Iceland. The Bank's lending to companies in trade and services increased during the year, which strengthens its diversified corporate loan portfolio.

Appendices

Legal disclaimer

This online Annual Report is published subject to reservations regarding possible errors. Should typographical errors, discrepancies or other obvious inconsistencies be discovered, Landsbankinn reserves the right to correct these and to update the online Annual Report accordingly in each instance.